Guidelines for employment and the remuneration of ministers

Transcription

1 Guidelines for employment and the remuneration of ministers Please note that this guideline has been developed for general use by Baptist Churches in NSW and ACT and may not necessarily be suitable for you and your church's situation. It is recommended that you consider whether the information is appropriate to your needs, and where appropriate, seek professional advice. 1

2 Contents 1. Purpose 3 2. Definitions, acronyms and terminology 3 3. Employing staff 4 4. Eligibility for exempt fringe benefits 4 5. Components of remuneration 6 6. Payment of salaries/ stipends and non-cash benefits 8 7. Exempt fringe benefits and Centrelink 8 8. Long service leave 9 9. Workers compensation 2

3 1. Purpose The purpose of this document is to provide guidelines for employment and the remuneration of ministers for Baptist Churches in NSW and ACT. This document has been prepared to assist churches determining their own policy on remuneration issues. 2. Definitions, acronyms and terminology ABN Accredited minister ATO BANSWACT Called minister Exempt fringe benefits FBT Fringe benefits Australian Business Number A person accredited with the Baptist Association of NSW and ACT who performs pastoral or other duties or activities that directly relate to the practice, study, teaching or propagation of religious beliefs. Australian Tax Office Baptist Association of NSW and ACT A person who is called by a church to carry out church pastoral or other duties or activities that directly relate to the practise, study, teaching or propagation of religious beliefs. Fringe benefits that are exempt from Fringe Benefits Tax. Fringe Benefits Tax A fringe benefit is a 'payment' to an employee, but in a different form to salary or wages. According to the fringe benefits tax (FBT) legislation, a fringe benefit is a benefit provided in respect of employment. This effectively means a benefit is provided to somebody because they are an employee. The 'employee' may even be a former or future employee. The terms benefit and fringe benefit have broad meanings for FBT purposes. Benefits include rights, privileges or services. For example, a fringe benefit may be provided when an employer: allows an employee to use a work car for private purposes gives an employee a cheap loan pays an employee's gym membership provides entertainment by the way of free tickets to concerts reimburses an expense incurred by an employee, such as school fees gives benefits under a salary sacrifice arrangement with an employee 1 GST Non-cash Goods and Services Tax See fringe benefits. 1 Definition of Fringe benefit from the Australian Tax Office Website available at 3

4 benefits Pastoral duties PAYG Recognised minister Religious practitioner Pastoral duties generally are duties associated with the spiritual care of the members of the congregation of a religious body. The following are examples of pastoral duties: a) communication of religious beliefs; b) teaching and counselling adherents and members of the surrounding community; c) providing adherents and members of the surrounding community with spiritual guidance and support; d) attendance at an in-service training seminar by a person or persons conducting the seminar, provided that the seminar is of a spiritual nature; and (e) meeting with and visiting adherents, the sick, the poor, or persons otherwise in need of emotional and spiritual support. Pay As You Go (Withholding tax) A person included on the Baptist Association of NSW and ACT list of recognized ministers who performs pastoral or other duties or activities that directly relate to the practice, study, teaching or propagation of religious beliefs. An accredited minister, recognised minister, called minister of the Baptist Association of NSW and ACT or a student of an institution who is undertaking a course of instruction in the duties of an accredited minister or recognised minister. 3. Employing staff A helpful general guide on employing new staff is available from the Fair work Ombusman website 2. Certain employees in churches are eligible to be paid in exempt fringe benefits. 4. Eligibility for exempt fringe benefits The following conditions must be met to be eligible to pay exempt fringe benefits: The benefit must be paid by a religious institution and The benefit must be paid to a religious practitioner and The benefit is provided principally in respect of pastoral or other directly related religious duties. Example ABC Baptist Church employs Rev Jane Doe as their Sole Pastor. Her main duties are pastoral. Jane is eligible to be paid fringe benefits that are exempt 2 Available at 4

5 from fringe benefits tax (also known as exempt fringe benefits). Example ABC Baptist Church employs Rev Jane Doe as the Executive Pastor. Her main duties are answering the phone, managing the property and paying invoices. Jane is not eligible to be paid exempt fringe benefits even though she is paid by a religious institution, and she is a religious practitioner as her duties are not of a pastoral or religious nature. Example ABC Baptist Church employs Sam Smith, a lay person as a called minister to lead their youth group. His main duties are those of a Youth Pastor. Sam is eligible to be paid exempt fringe benefits. 5

6 5. Components of remuneration Remuneration provided to religious practitioners for their pastoral duties consist of one or more of the following elements: a) Salary or stipend b) Superannuation c) Use of a fully maintained vehicle or the provision of a travelling allowance d) The provision of a manse or the provision of a housing allowance e) The payment of utilities and other allowances e.g. telephone, electricity and gas f) Other benefits (some which are a legal requirement) including the provision of annual leave, long service leave, parental leave, personal leave, workers compensation insurance, professional indemnity insurance. Remuneration component Salary or stipend BANSWACT Recommendation In line with BANSWACT s recommended stipend which is updated annually Housing allowance In line with market housing prices. Car allowance In line with BANSWACT s recommended car allowance which is updated annually Superannuation In line with the superannuation 4 guarantee plus an additional 2%. Payment of utilities As agreed between the religious practitioner and church Annual leave In line with national legislation. (being 4 weeks per annum) Non-cash Income tax component 3 Treatment 50% 50% is Assessable income i.e. subject to income tax by the religious practitioner 100% Not assessable 50% 50% is Assessable income i.e. subject to income tax by the religious practitioner n/a n/a 100% Not assessable n/a In line with the split of remuneration component above Long service leave In line with the Baptist n/a In line with the 3 There are no available guidelines for the portion that can be paid as a non-cash component. The percentages listed are a guideline set by BANSWACT. 4 Superannuation rates are as follows: Year Superannuation rate % % % % % and subsequent years 12.0% 6

7 Long Service Leave Scheme. Refer to section 7 below. Personal leave In line with national legislation (being 10 days per annum for full time employees and on a pro rata basis for part time employees) Parental leave In line with national legislation. Refer to the Fair Work Ombudsman Website. 5 n/a n/a split of remuneration component above In line with the split of remuneration component above In line with the split of remuneration component above Example ABC Baptist Church employs Rev Tom Jones as their Sole Pastor full time. His remuneration details are as follows: Stipend Housing allowance Car allowance Superannuation Long Service Leave $50,000 p.a. $20,000 p.a. $8,000 p.a. $8,050 p.a (being 11.5% of the stipend and housing allowance in line with Baptist Association guidelines. ) $1.300 p.a. $29,000 p.a. (being 50% of stipend and car allowance) is paid into his personal account and is assessable income i.e. needs to be declared as income in his personal income tax return. $49,000 p.a. (being 100% of housing allowance and 50% of stipend and car allowance) is paid into a non-cash benefit account as an exempt fringe benefit. Refer below to section 4 for further details. $8,050 p.a. is paid into his nomination superannuation fund. $1,300 p.a in long service leave contributions are paid quarterly into his Baptist Association Long Service Leave Fund account. Refer to section 7 for further details. Salary or stipend It is recommended that a religious practitioner be paid an amount in line with BANSWACT s recommended stipend which is updated annually. This information is available on our website. 6 Housing allowance Housing allowance should be paid where the church does not provide housing accommodation for the pastor (i.e. access to a church owned manse, or leased property) and should be negotiated between the church and the religious practitioner with reference to the local property market. 5 Available at 6 Available at 7

8 The purpose of the housing allowance is to provide the religious practitioner with the financial capacity to live close to their ministry context whilst taking into account their personal family situation. However, except for these factors, it is anticipated that there would be minimal disparity in the housing allowance between religious practitioners of the same church. Housing allowance payments to religious practitioners should be on a pro-rata basis. For example, a part time pastoral employee who works 2 days per week would receive 40% of the amounts recommended. Provision of utilities and other allowances The provision of utilities and other benefits is as negotiated and agreed between the religious practitioner and church. 6. Payment of salaries/stipends and non-cash benefits The taxable portion of an employee s salary or stipend should be paid into their nominated personal bank account as requested by the employee. The non-cash benefit portion should be deposited into an account in the name of your church to pay for expenses on behalf of the religious practitioner. Records should be kept for all expenses from this account as the church would do for all other expenses e.g. invoices. Example In the same example above for Rev Tom Jones: $29,000 p.a. of his remuneration is paid into an account under his own name $49,000 p.a. is paid into an account under the name of ABC Baptist Church for payment of expenses on behalf of Rev Tom Jones. GST and non-cash benefit accounts Expenses incurred using non-cash benefit accounts may include GST. This may be claimed back in the churches BAS return provided that the church is registered for GST and there is appropriate supporting documentation. Refer to the ATO website for documentation required to claim back GST. 7 Non-cash benefit accounts allowed and disallowed expenses Tax legislation does not limit the types of expenses which can be paid on behalf of religious practitioners. The types of expenses which can be paid from noncash benefit accounts should be decided by leadership or governance group at the church. The Baptist Association recommends that the following expenses should not be spent using non-cash benefits 7 Available at 8

9 Cash withdrawals and advances and any other instrument that can be converted into cash e.g. travellers cheques Mortgage payments into a loan offset account. (However, payment into a redraw facility is deemed to be fine as per Taxation Ruling TR 2000/2.) Fines e.g. parking, speeding offerings, donations and gifts of a financial nature Tax deductible costs (i.e. payments from Fringe Benefits accounts cannot be used as tax deductions Taxation debts e.g. income tax or withholding tax, HELP/ HECS debt. Centrelink debts Child support payments 7. Exempt fringe benefits and Centrelink Family Assistance Payments (Family Tax A and B Payments) The adjusted taxable income for the purposes of Family Tax Benefits does not include exempt fringe benefits (note that it does include reportable fringe benefits). Centrelink payments Income for the purposes of Centrelink payments are based on valuable consideration under the Social Security Act 1991 and includes exempt fringe benefits. 8. Long service leave An employee in Australia is entitled to long service leave after a long period of continuous employment with an employer, in New South Wales, it is of 13 weeks of long service leave for every 15 years of service vesting at 10 years i.e weeks per year and legal entitlement after 10 years of service. However, in churches, it is common for ministers to move churches with less than 10 years of service. In order to provide Baptist Ministers with a benefit, a Long Service Leave Fund was set up whereby long service leave entitlement is transportable between Baptist churches and approved organisations if certain criteria are met. Refer to the Long Service Leave Fund Rules for further details. 8 If the member does not meet legal entitlement i.e. leaves Baptist Churches or approved organisations before accumulating 10 years of service, the funds are returned to the Churches that made the contributions. Payments made where the member has not reached 10 years is at the discretion of the Church. It is noted that there is no legal obligation to make payments prior to 10 years except in the case of redundancy or resignation due to illness, incapacity or domestic or other pressing necessity where by it is pro-rata-ed after 5 years. For example, if a minister works in one organisation and is made redundant or resigned due to above reasons after 5 years or more service, he will be entitled 8 Available at 9

10 to a pro rata portion of long service leave in line with legislation in NSW i.e. 13 weeks for every 15 years of service or 0.87 weeks per year of service. For further details, refer to the Baptist Association website Workers compensation All employers in NSW, unless you pay less than $7,500 in annual wages, must have a workers compensation policy. 9 Available at 10